During periods of economic sluggishness and high unemployment, lawmakers have used stimulus checks in the past. But that’s not where we are right now.
Consumers in the United States have been fighting inflation for well over a year. In order to keep up with their bills, many people have had to take withdrawals from their savings and rack up debt on credit cards.
The good news is that the annual rate of inflation has reduced to 6%, which is still high but lower than the 6.4% annual rate recorded in January. Yet, overall living costs remain excessive, and consumers continue to struggle to afford their basic necessities. Unfortunately, we cannot expect stimulus aid to save the day in this situation.
New Rounds Of Stimulus Checks
In this circumstance, it is extremely difficult to make the argument for additional stimulus because there are no signs that the economy requires a boost. As a result, the federal government is unlikely to distribute stimulus funds anytime soon.
Individual states may now provide stimulus assistance later in the year. Numerous states took this move last year to assist residents in dealing with inflation. But, many People will not accept stimulus funds.
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How Stimulus Payments Could Exacerbate Inflation?
It is critical to understand that stimulus checks will not solve the problem at hand. They are more likely to exacerbate the problem.
One of the main reasons inflation began to rise in 2021 was because Americans’ bank accounts were more strong after receiving stimulus funding and monies from increased tax credits, such as the Child Tax Credit. This increased consumer spending power significantly.
Yet, an increase in spending created a situation in which demand outpaced supply, which is the perfect recipe for inflation.
The Federal Reserve has been actively hiking interest rates in order to dissuade people from spending. And raising borrowing costs is likely to result in that scenario. Consumers who are tired of rising credit card and loan rates are more likely to cut back on their spending to avoid being overcharged.
It will almost certainly take a significant decrease in consumer spending to bring inflation levels down. Moreover, because another round of stimulus checks would have the opposite impact, we’re unlikely to see one anytime soon.
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